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Use of ERISA legal counsel at larger companies


Guest ColeStevenson
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Guest ColeStevenson

I am interested in understanding prevelance of dedicated in-house ERISA legal counsel at larger companies (5,000+ employees). The key word here is "dedicated" -- not an in-house employment/labor attorney who does benefits on the side.

We are trying to look at this from many angles and are particularly interested in views from Comp & Benefits Managers "out there".

What might there be to gain &/or lose by sticking with our current outside counsel at a large law firm versus bringing all the work inside? By the way, service and quality from our outside law firm is outstanding, but as you've likely guessed by now the bills are substantial.

Any insights welcome and appreciated.

Cole Stevenson

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I doubt that you will find a single dedicated ERISA in-house attorney at a company of 5,000 employees. In over 25 years in private practice, I've encountered less than ten of them, and they were almost all with companies of 50,000 to 100,000 employees. I've done work for Fortune 100 Companies that didn't have a dedicated ERISA in-house attorney.

Kirk Maldonado

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I have seen a successful situation involving a company with a few thousand (4-5 K) employees where the associate general counsel was an ERISA attorney was hired to do lots of corporate duties as well as in-house ERISA work. They used outside counsel for drafting and litigation, but most ERISA questions were handled internally.

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Kirk: I dont know what co you are familiar with to make such a comment but in the NY-NJ-CT met area alone there are more than 20 corp of less than 50,000 employees with dedicated ERISA counsel who have been hired full time for less than it would cost for 500 hours from outside counsel who charge up to $500 a hr. Several corp with less than 50k ees have more than 1 ERISA attorney. Determination of the need for inhouse counsel is based on the number of qual plans, subsidaries, executive comp plans, etc, that a corp maintains, not the number of employees. Some specalities such as M & A and litigation have to be farmed out but there is no reason why inhouse counsel cannot perform compliance and review for all laws pertaining to plans on an more time sensitive and efficient basis than outside counsel. In fact there is a movement by corporate counsel to bring specialized tasks such as ERISA in house to reduce legal bills. (Some GC only saw the light after receiving exhorbant legal bills for routine services such as QDROs and preparing plan amendments for recent tax legislation.)

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Ditto on Kirk's comments. I work with dozens of multiemployer plans. Some of these plans have hundreds of thousands of participants, but I've never encountered any plan with an in-house ERISA attorney. Each plan retains the services of outside counsel specializing in ERISA. If the plan's really fortunate, it gets to work with someone of Kirk's calibre.

Lori Friedman

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For what it is worth, for the vast majority of my career in private practice, I was in Southern California.

My ERISA practice has been very different than my brethern on the East Coast. I've had few clients with defined benefit plans and/or retiree medical plans in almost 25 years in private practice. Similarly, they have few SERPs (of the defined benefit variety) Also, there isn't nearly as much work on the West Coast involving multiemployer (pension) plans and collectively bargained single employer plans. Likewise, my impression is that West Coast companies are much less likely to have COLI, split dollar arrangements, extensive severance pay plans, and other types of executive compensation plans providing cash benefits.

This difference in the types of plans the employers sponsor may be one reason why companies on the East Coast have a greater need for in-house ERISA attorneys than their West Coast counterparts.

Kirk Maldonado

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Guest Harry O

I am on the East Coast and a majority of companies (especially public companies) with 5,000 or more employees have in-house ERISA counsel. The smaller companies will typically have a lawyer in the legal department who does basic ERISA and employment law. The middle size companies will have one or two lawyers in the legal department who are ERISA specialists. The larger companies will have one or tow dedicated ERISA lawyers in the legal department and, in many cases, an additional lawyer in the tax department specializing in tax-related benefits and compensation matters.

I generally agree with mjb's comments except that every company I've worked for (I've been in-house at three public companies, each with 50,000+ employees) outsourced plan drafting to outside counsel. Each of these companies did extensive M&A and had numerous DB plans. It was almost impossible for the in-house people to keep up with the paper. In addition, the exact wording of DB plan documents has become critical in litigation (there are plaintiffs class action firms who do nothing but troll through DB plan documents looking for ambiguities and drafting errors). Poorly drafter DB plans can create HUGE unexpected liabilities. I'm a firm believer that all DB plan amendments should be drafted by outside counsel and heavily reviewed by the employer's actuarial advisors. This is not an area to cut corners . . .

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  • 10 months later...

With the exception of plan drafting and litigation it would seem to me to be very cost INEFFICIENT for a large company not to have someone in tax, HR or legal dedicated in some form to tax or ERISA employee benefit plan/compensation issues.

I think companies, particularly public companies, should take a hard look at the cost of the "laziness" of farming everything to outside counsel.

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My experience in the 5,000 EE range is the risk that when counsel splits time between ERISA and other areas, they can get drawn more and more into those other areas. Admitted we were more complicated than most (4 DC and 4 DB) but after our GUST DL submissions were sent days after the deadline, our GC finally conceded the benefit of outside firm taking over majority of ERISA w/ in-house reviewing and coordinating. (But going back to original post, we never had dedicated in-house counsel, they always handled either employment or tax law as well.)

One aspect is having enough ERISA work to keep someone in-house busy enough to not lose them to other projects. Even if a dedicated inhouse ERISA counsel can be cost justified versus outside fees, what GC is willing to let someone sit around w/ spare time? Another aspect is that it can be more clear cut which outside expenses can be charged directly to the plan versus being paid by the company (or at least the perception it's more clear cut versus trying to split out parts of an inhouse counsel's salary).

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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(But going back to original post, we never had dedicated in-house counsel, they always handled either employment or tax law as well.)

LOL. Maybe that's why your GC finally conceded the benefit of outside firm taking over majority of ERISA w/ in-house reviewing and coordinating!

But anyway, I like the points you made. I think it makes more sense (going back to the original post) to use outside counsel just for either non-tax ERISA stuff (like litigation/benefit claims) or the qualified plan amending (GUST, etc). For example many outside firms actually become "ERISA counsel"--almost like in-house outside counsel if you will.

But the field of employee benefits encompasses so much more than ERISA (tax, SEC rules, accounting) that outsourcing too much might be bad. You cannot depend on outside vendors for everthing. Having an in-house resource dedicated to employee benefits/compensation who knows the inner workings of the company will reduce the chances that things will be overlooked, especially if you are spreading your staff too thin, or depending on someone whose has too many other responsibilities.

I agree the company has to have the work to justify the expense, but I would submit to you that in a company of 5000+ employees you would not have to search hard to find work. The question is whether the person will be proactive or just sit around until a fire starts.

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